How do they determine the amount of taxes the government collects on lottery/game show winnings?
You should receive a 1099 for the prizes you received and report them as miscellaneous income. Sometimes, income taxes are withheld from cash prizes, in which case you should attach the 1099 to your income tax return. First, you should be aware that your lottery winnings are taxable. This is the case for cash winnings and for the fair market value of any noncash prizes you might win (e.g., a car, vacation, etc.). Depending on your other income and the amount of your winnings, your federal tax bracket can go as high as 39.6%. If you win more than $5,000 in the lottery, 28% must be withheld from your winnings for federal income tax purposes. You will receive a Form W-2G from the payor showing the amount of lottery winnings paid to you during the year and the amount of federal income tax withheld. Your lottery winnings might also be subject to state income tax. Thus, depending on where you live, your total tax bill could exceed 50%. You don’t get any capital gains rate break for lottery w
